inventory management

Inventory turnover refers to the number of times inventory has been sold or used then replaced in a specified amount of time. A higher inventory turnover rate means that a company's capital is being used and less capital is required due to the profit of inventory being sold. It also helps to maintain price stability since a company does not need to host sales in order to get rid of excess inventory. Instead, it allows for products to be sold at a steadier price.

Inventory days of supply refer to an efficiency ratio measuring the average amount of time in days that a company or warehouse holds inventory before selling or shipping it. These are utilized for raw materials (RM), work in process (WIP), partially finished goods (PFG) and fully finished goods (FFG). To calculate inventory days of supply, divide the average inventory by the cost of goods sold (COGS) in a day.

Inventory management is the tracking of inventory throughout the entire supply chain and monitoring stock demands and availability. Inventory management is key to improving visibility and flow within the warehouse as knowing exactly what is inside and where it's located can help manufacturers speed up fulfillment, cut costs and improve customer service. Effective inventory management allows suppliers to maintain the right balance of stock in the warehouse and replenish when necessary, ensuring product availability when and where it is needed.